That Was The Week That Was-1st Week November

It was billed as a momentum week, with stocks continuing their healing process from the summer meltdown, but unforeseen events pulled the rug out. It began last Monday when the Greek PM announced he wanted the Greek citizens to vote on accepting the austerity measures as part of the EU bail out. He tossed an enormous wrench into the European debt crisis because 60% of the Greek citizens are against any additional government cutbacks that are conditional for any European aid. That same day a significant commodity trading firm, MF Global, with a huge bet on European sovereign debt went belly-up. The entire week was devoted to uncertainty- again. Here’s the news as it unfolded with other stuff I found interesting along the way… The week ended with stocks slightly down- We can expect more disruption from Greece this company week as the opposition party demands that the citizens get to vote on further austerity measures…(the Greeks want the bailout money, belong to the EU but no more cutbacks or paying the price..) Like that’s going to happen…

Italy Next? The third largest country in the EU has significant debt problems. Many worry that if Italy rolls over there is no saving from a global depression.  The European Central Bank is buying Italian bonds in an attempt to drive yields down and Prime Minister Berlusconi brushed aside worries of an Italian default. Quoted in the Financial Times Saturday morning Berlusconi said the Italian economy was good, tourism was high, hotels and resorts fully booked. He refused EU assistance of some 50 billion Euros but did accept highly intrusive IMF financial monitoring.

  Day Traders say it’s been a tough year. Investing is not as easy as Fox News and others make it seem.  Fidelity used to advertise that anyone could self-manage their investments successfully. Today they advertise to use a professional to guide an investor to retirement success…times change. However, Thomas Kee, Jr. has a tip for those frustrated with 2011. Simplify your investment method by buying one stock per week. Start each week with a buy and at the end of the week, no matter the result sell and own cash through the weekend. He has other rules as well; such as ignoring penny stocks and those trading over $100. He calls this strategy, ‘The Stock of the Week’.

Sprint & Clearwire are close to signing a long-term deal for Sprint to use the Clearwire network. The new agreement is a boon to both companies as Sprint will get lower costs and Clearwire was clearly on the ropes without Sprint. Shares of both popped Friday last on the news.

China shuffles Financial Regulators. Bloomberg reported both outgoing regulators have left the Chinese financial and banking system in better shape today than they got it. Now at the age of retirement both are leaving as China readies itself with surpassing the United States as the world’s largest economy. This is expected by 2018.

Barron’s Take: Coca-Cola has a buy rating and $77 per share price by Citi analyst Wendy Nicholson. Part of her analysis includes knowing that the U.S., a massive guzzler of Coke, will have the third largest population in the world behind China and India by 2020. Coke believes, according to Barron’s Take, that they have the right stuff and media strategy to keep them #1. KO closed at $69 end of October.

• Barry Diller, Coca Cola Director since 2002 bought another huge amount of shares in the company on November 1st and 2nd to the tune of $6.7 million. This latest 100,000 acquisition was in addition to his February purchase of 235,000 shares of Coke in February of this year.

Lowes Has Issues: Closing 20 non-profitable stores, will open 10-15 new in 2012 and laying off 1950 workers.

Age of Shale has arrived. This plus Canadian Sands may make North America energy vibrant again. The shale frenzy has pushed the value of total U.S. gas and oil deals to pert near $300 billion over the past 2 years. Middle of October Kinder Morgan bought rival El Paso for $21 billion. The company said that the shale glut will not be short-lived and billions will be needed in infrastructure.

No Economic Domestic Fast Track until someone comes up with a plan for housing.

Brett Arends took a big gulp of Kool-Aid and suggested to readers that they invest in the Greek stock market!  His reasons include: The market in Greece is cheap; Equities are the real assets and don’t belong to the government; There is blood on the street, which is a buy indicator for stocks; and no matter what happens regarding the debt the companies in the Greek stock market are not going away….There are arguments against as well…

U.S. taxpayers are helping fund the Greek Bailout! President Obama buried the $54 billion largesse in a war funding measure to avoid an up and down vote for using funds to bail out a foreign country. This from Jim McTague in Saturday’s Barrons D.C. Current.

Eight Companies That Have Consistently Raised Dividends for 25 Years or More: This from TopStockAnalysts. Do not invest before doing homework but here’s their list…

• Pitney Bowes
• Cincinnati Financial
• Leggett & Platt
• Johnson & Johnson
• Abbott Labs
• Automatic Data Processing
• McGraw-Hill
• PPG Industries

 

Buying a stranger’s life insurance policy as an investment just got tougher. The Delaware Supreme Court ruled that insurers can challenge the legitimacy of ownership and beneficiary even past the standard 2 year incontestable period. This business has been reeling for the last 3 years and Delaware may have put a nail in the coffin to speculators and hedge funds. The Life Settlement business now has to regroup. The problem stemmed when frauds were committed on the purchase of several elephant sized policies and the insurance companies sued the life settlement organizers.

Schmart too late? Someone’s always doing surveys and this one comes from Texas Tech University school of financial planning. Across the board the study found that Americans are, for the most part, financially illiterate. But, what’s worse is the survey showed that as people grew older they became more confident in their ability to handle finances when in actuality they were becoming less capable starting at age 60. By the time we’re 85 we’re pretty much  dunderheads.  Now, what the hell was I thinking about?

  Preparing For Hyper-Inflation? On pins and needles investors worry about inflation, high interest rates and the price of goods and services to sky-rocket. So when will that happen? Experts agree that not until the economy gets a firmer grip will we see prices rise and once started it’ll be a long-long ride. How will inflation impact you, me and the candlestick maker? Housing, cars, food and energy all will cost more. Income will also rise but not as fast as goods and services. Investors may well start examining inflation sensitive sectors such as real estate, commodities and energy.

Yikes! Domestic markets fell 276 points on the Dow last Monday as Greek government hitched its britches and refused to accept more economic abuse for receiving its needed largess until agreed by voters. Greek government surprised Europeans and U.S. regulators with their late Monday call. The Greeks seem to feel their people will back a European designed austerity plan but with the recent rioting that remains a dim issue. And in the U.S.A. a company called MF Global filed for bankruptcy because they couldn’t account for about a $700 million dollars of customer money plus their extraordinary exposure to foreign sovereign debt. On Tuesday MF Global admitted to using customer money to regulators. MF Global can trace its roots to sugar traders back in the 1700s but rising rates on Italian, Spanish, Portuguese, Irish and Belgian government bonds did them in. The company held $6.3 billion of sovereign debt with $1.2 billion in firm’s equity. That was enough for them to go scrambling for a deep pocket suitor over the previous weekend but when the time came to examine the books before the final agreement auditors found close to a billion bucks was unaccounted for. The deal ended like a limp handshake after a bad first date and the firm had no choice but to file for bankruptcy. The lesson is two-fold: One- investors are now allowing firms to fail- even the big ones like MF Global and those investment firms with big exposure to sovereign debt will be avoided until things cool down in Europe. …Friday afternoon searchers found about $600 million at JP Morgan….but regulators say there is still about the same amount of customer money missing….

Thousands of Investors are burned by the MF Global bankruptcy. There will still be over a billion dollars to split up with the lead investors considered to be Fidelity Investments parent FMR Corp, Guardian Life, TIAA-CREEF and Rydex Security Global Investors; they account for about 25% of all outstanding shares as reported by MarketWatch.com

Barrons & Morningstar reported which mutual funds held significant shares in bankrupt MF Global. None of the funds are on my preferred fund list and clients should not be concerned. However for those interested here are a few funds that hold significant shares in MF Global: American Beacon Evercore Small Cap Equity Fund, Alpine Dynamic Financial Fund, Eaton Van Small Cap, Templeton Global Smaller Companies Fund, Templeton Foreign Smaller Companies Fund, Fidelity Select Brokerage & Investment Management and Select Financial Services.

Brett Arends wrote in his blog that what we don’t know about MF Global is: The guy, Jon Corzine, who ran MF Global said a week before the company bellied up, ‘ We are pleased with our strong resources and outstanding execution and will provide investors competitive returns in the quarters to come.’ Then seven days later the lights went out.  And, according to Arends, the blow-up of MF Global took even the honchos by surprise. The CEO bought $450,000 shares as recently as August. Corzine resigned  Thursday, said he was taking not a sou of his $12 million entitled severance and would assist regulators as much as possible.

Amazon & Apple: Dimitra Defotis wrote in WSJ Technology column that investors should ‘wise’ up to the extraordinary power of Amazon. No longer just a ‘bookseller’ the company is growing influence in cloud computing for corporations to GPS navigation for cars. Lets not forget its new Kindle Fire. Any opportunity to accumulate shares from here, said Keith Goddard a money manager in Tulsa, OK., who now regrets selling his shares around last week’s price.  Apple has a huge war chest and plans $8 billion in capital investments in 2012, nearly double that of 2011. That includes almost a billion dollars in retail stores!

MGM and Boyd getting their ducks in a row, reports WSJ, for the day when the government approves on-line poker. This may be what the government wants and is looking for-companies that can ensure fair treatment of players and also share with them in the spoils. The companies announced they would be sharing platforms and investing in Bwin.party, which is licensed in Gibraltar, France and Italy and does business under its PokerParty brand.

Citigroup COO sold 1/4 of his stock holdings. Lon Juricic, president of StreetInsider.com said about the sale, ‘He (meaning Citigroup COO John P Havens) doesn’t see any upside soon is what his sale tells me. It seems like bad timing with the situation in Europe and all the financial stocks, so why not hold off till things calm down?’ Getting ahead of some Christmas shopping…?

Bill Gates sold $10,000,000 of Microsoft stock at the end of October.

Markets took another Hit on Tuesday. We’ve seen this show before. It’s manic-depressive with extreme highs and deep lows. Looking for help gold was steady, after falling in early hours 2% and oil held its own at the close. Brian Amidei, managing director and partner at private wealth management firm High-Tower Advisors said, ‘I read as much research as I possibly can. I am relying on some very smart people in international affairs. We get a lot of things on our plate, and to be an expert on all of them is very hard.’ Eagle Asset manager Dennis Cowart said it best, ‘ When U.S. markets were beholden to Slovakia’s parliament, a few short weeks ago, most of us couldn’t find the country on a map – yet it’s wagging the tail (or maybe he meant dog) – it’s a ridiculous situation.’

The Street says they like the following stocks to pop in the 4th quarter: CenturyLink, Apple (who doesn’t!?), Sclumberger, Kaiser Aluminum and Ford.

Avi Salzman at Barrons.com gives the inside poop on why auto stocks get no respect: Here’s the deal every time auto’s announce sales it does them no good as traders pound their share price. They did it again on Tuesday as autos were on pace to sell over 13 million units. Why? Salzman says autos unfortunately have been reporting on down days. Plus, the markets respond negatively no matter how good the news. Seems the Street wants the days when autos padded their results with fleet and rentals. Those days are gone and eventually the Street will have to realize its a different reporting world.

Fed will keep rates exceptionally low through the middle of 2013. Owners of short term bond funds may extend maturities to increase yield with a significant measure of knowing no rate increases are on the horizon. This means more money with little extended risk. The Ben Bernanke also expressed modest optimism in the economy but stressed slow growth, at best. Concerns about European fiscal and banking issues have contributed to strains in global financial markets and have adverse effects on confidence and growth. The dollar fell and stocks rose even as the melodrama overseas continued to play out. The Dow up over 170 points, off its highs for Wednesday last.

 

China a Player! You can bet your bippy if approached to assist in the EU bailout China will wring some exacting conditions for investing in the EU. The ‘in-your-face’ attitude by the Greeks may be the final straw as Europe looks for deep pockets to get them through this new and unseen complication. According to Robert Powell at MarketWatch as China moves more to the center it will provide outside investors greater transparency with where the Chinese opportunities are. ‘You cannot not pay attention to them,’ said Philip Abbenhaus the director of Asian Equity Research Institute. ‘In the long run it may well be that the United States will end up servicing the needs of both Indian and Chinese growing middle class. The United States will end up simply feeding and entertaining the Third World citizens.’

Thursday Greek PM announced no referendum by Greek voters was needed as the Dow surged 200 points on the anticipated news. Yes, dear reader, traders seemed to take this latest bit of  Greek theater with their morning bagel and cream cheese and motored bravely on before any announcement. Gold stuck flat at 1765 and oil climbed to $94.21. It was rumored that Merkel and Sarkozy threatened Papandreou with ouster from the European Union and not one shekel of aid-ever! Putting them to the test both French and German leaders showed their mettle in dealing with a potential global financial meltdown.  Greek lawmakers voted to form a coalition government Saturday morning and gave George P his vote of confidence, which according to the WSJ, was significant.

 IPO Groupon closed up 31% in its Friday debut. But, hush, dear reader, you didn’t miss a thing as Morningstar reports the stock isn’t worth the $26.11 it closed at last Friday or even the $20.00 it opened at. The reporting and analytical company went on CNBC and also wrote that Groupon was worth $8.00 a share. What was amazing to investment professionals was that Groupon was able to bring its shares to the public during a down market and with a company that had yet to earn a single drachma in profit.  We like many others are waiting Facebook IPO.

Berkshire Hathaway –Warren Buffett’s company posted operating earnings up 37% from same period 2010. Shares closed Friday at $115,806. The stock is down 7% from a year ago. If El Warren can’t show positive results in a tumultuous year with all his behind the scenes special deals you know its been a tough year. 

  Finally- From The Department of Stuff I Wasn’t Aware of While Looking up Other Stuff I Didn’t Know: The Swiss are turning gold ingots into consumer products. PAMP, one of the top refiners in Switzerland, has started manufacturing whimsical designer gold bars for specific markets. There are ‘Hello, Kitty’, small stamped ingots for Koreans and India has the many armed goddess and for the U.S.A. we get a small ingot stamped with the happy likeness of Snoopy.

Questions call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog with someone who cares about their money.